Lessening Risk Aversion Amid Receding Concern About Greek Debt Crisis

March 8, 2010

The dollar retreated 0.6% against the kiwi, 0.4% against the Australian dollar, 0.2% relative to the Canadian and Swiss currencies, and 0.1% versus the euro, but the greenback moved 0.2% higher against the yen and firmed 0.1% against sterling.

In the Pacific Rim, stocks advanced 2.1% in Japan, 2.0% in Hong Kong, 1.9% in Indonesia and Malaysia, 1.6% in South Korea and Singapore, 1.3% in Taiwan and Pakistan, 0.8% in China and 0.9% in Australia. However, stocks are slightly lower in Europe, with dips of 0.1% in Germany and France and 0.3% in Britain.

Ten-year British gilt yields firmed 2 basis points, but comparable German bund and Japanese JGB yields are steady.

Gold is unchanged at $1135.40 per ounce, while oil firmed 0.4% to $81.83 per barrel.

Investors feel somewhat reassured by the well-bid Greek bond issue late last week. French President Sarkozy said the EU should help out Greece if necessary, while Greece’s central bank governor believes outside aid will be unnecessary.

A top Chinese central bank official hinted that an upward adjustment of the yuan will be engineered but was unspecific about how soon that would happen. Some analysts think the timing is but a month away. In any case, the movement is likely to be very gradual.

Japan recorded a Y 900 billion unadjusted current account surplus in Japan compared to a Y 133 billion deficit a year earlier. The trade surplus was Y 197 billion. January is the weakest month for Japanese trade; often there is a deficit like the one of Y 845 billion last year. Export growth accelerated to 40.6% from a year earlier after 11.7% in the year to December. Imports increased 7.1% on year. The sum of the current account and portfolio and direct investment flows, the so-called Basic Balance, showed a Y 5.73 trillion surplus in January versus a Y 3.94 billion deficit a year before.

Japanese seasonally adjusted current account surplus widened 31.5% between December and January to Y 1.71 trillion. Stock and bond transactions with non-residents generated a Y 235 billion outflow in February.

Japanese money growth slowed in February. M1 posted a 0.9% increase from February 2009, down from 1.2%. Gains of 2.7% in M2 and 2.0% in M3 were down from 2.2% and 3.0% in January. Bank loans declined 1.6% and by 1.5% including those by Shinkin banks from a year earlier. Loans in the year to 4Q09 had been up marginally.

Japan’s economy watchers index, a gauge of retail sector demand, improved significantly to 42.1 in February from 38.8 in January and November’s recent low of 33.9. Such was the best reading since 42.9 last July.

German industrial production only rose 0.6% in January, about half as much as expected following a worse-than-anticipated 1.0% decline in December. Output was just 2.2% greater than a year earlier. Production of capital goods fell by 1.0% in the latest reported month. The surprising 4.3% resurgence in industrial orders reported just before the weekend bodes well for better production in coming months.

The Sentix index of Euroland investor sentiment improved more than anticipated in March with a reading of minus 7.5 after minus 8.2 in February.

The Bank of France gauge of business sentiment was 102 in France, less than forecast.

Swiss retail sales volume increased on year by a robust 4.4% in January, almost twice as much as the expected gain. A 4.7% increase in the year to December was the biggest 12-month rise since September 2008. Swiss unemployment of 4.4% in February (4.1% seasonally adjusted) was as expected.

The Czech trade surplus of CZK 13.1 billion in January was 4.75 times bigger than in December and three and a third times greater than a year earlier. Exports rose 6.2% on month, while imports edged 0.1% lower.

Turkish industrial production firmed 0.3% on month and 16.1% on year in January.

Taiwan posted a $9 million trade surplus in February. Exports and imports were 32.6% and 45.8% greater than a year earlier. Asian two-way trade flows are smoking.

The New Zealand manufacturing index rose 0.7% last quarter, reversing a drop in the prior period.

No U.S. data get released today, but Canada will be reporting housing starts.

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